My reasoning on why starting businesses is easy in 3 steps (Part 1)
The typical path to create a money is straightforward: Save money, start your business and escalate it. In the following lines I will explain why some of those are easy considering that you don’t need as much money as you may imagine and you also don’t need as much expertise as some say.
Exchange your time or your skills for money.
The first step is the traditional path of the entrepreneur. In order to make money, you should either exchange your body (bartender, call operator, cashier, etc.) or use your current skills to make money. In both situations you would be exchanging your time for money with a very low cost or even 0 costs, but if you could choose only one the best path would be the skill path considering that skills are valued by the quality of it and not the amount of time spent doing something. Therefore if you are able to improve and master your skill you will also be able to request a higher price which will go into savings, which does not happen with exchanging time for money as the day has only 24 hours and 1/3 of those are spent sleeping so you’re maximum income is already limited by nature.
Create your company
When you’ve cashed a good amount of money by exchanging your time, the next step would be to start a Limited Company — without interrupting the first step. The role of the Limited Company is to limit your exposure to risk by separating your personal cash from the cash allocated to operate your business so the failure of the company doesn’t have any direct impact on your personal savings (not legal advice).
As the goal is to make as much money as possible without cash, the most suited type of companies would be the ones offering services because: 1) They have low costs, their only expenses being the human capital and the office maintenance (if any); 2) Their costs are covered by the client’s request; and 3) Because of their low cost maintenance, the profit can be easily re-invested into the company to grow it.
Also, the reason why I prefer service companies is because of the following quote: When everybody is looking for Gold, be the one selling shovels.
Some examples of services: Law, consulting, finance, etc., in other words everything which doesn’t aim to create and instead is focused on helping others to create. But, with a notable observation, those services shouldn’t be focused only to serve a small community, instead you should strive to create and offer services which can be requested from around the country, continent or world, because opening a business aimed to service a small community already limits your income to only 500 people in the area.
Escalating the company
Once you established your company and you have some operations going on, you need to escalate it. In order to do that in the most efficient way possible, the best solution would be to request the services offered by third parties i.e. consulting firms on how to properly manage different branches of your business. Understandably, your company will support those costs but for a good cause: To have higher profits in a future. Also, the purpose of consulting firms is to help you maximize your efficiency and to explore or penetrate new markets where you could expand your operations.
Also, during this phase you could use credits to finance some of your operations (read: external money). The benefits of using such source to finance your business is that banks will often perform due diligences on your company to evaluate your ability to repay them back. This is advantageous because you can receive an immediate feedback of how your business is performing and also banks will usually help you manage things efficiently to prevent bankruptcies (they help you so they can help themselves).
TLDR - Starting business is not as hard as it seems. You don't need a lot of money, a lot of knowledge or to take a lot of risk. You just need to know who can help you in each moment with your business.
Starting a business is easy. What is hard is starting a successful business. How many successful businesses have you started?
Working on that, in 5 years I will come back to let you know how it's going.
Someone should start another thread "How to Become a Billionaire in Two Easy Steps!"
Step 1: Create a business
Step 2: Earn a billion dollars
Would be equally uninformative as this crap, but at least a quicker read.
lol
👏🏼👏🏼👏🏼👏🏼
Another distinction i would add is the difference between complexity and difficulty. I’m theory- starting a business is not complex. You file a few forms, pay a few fees, get customers to pay you, and do work. It’s only a handful more steps than being an employee.
It’s difficult, takes a lot of effort and energy to get the execution steps right, and scale up to make it worthwhile.
That's exactly my idea. I don't think any entrepreneur has enough expertise to understand the market enough so why don't delegate those decisions to external sources which have more experience (you want to buy some companies - IB, you want to become more efficient or want to get into new markets - Consulting, you need to minimize your taxes - Wealth Management, etc.), everything can be externalized, your only responsibility is to maintain a decent cash into the business so it can operate, and even then you can go for credits, crowdfunding, business angels, factoring, leasing, etc. But mostly that will be done by the CFO, your goal is just to think on the next move and if you have all those experts giving you their services you can easily be headed towards becoming successful.
The businesses which often fail I think it's because of the management ego's or the CEO's ego, they are unwillingly to listen to others or they live with the fear that other will take their company.
So, where exactly is the difficulty of a business if you are covered from all sides by more experienced people?
Because that costs money. Which you don't have. You don't have a product or a customer base and you're already hiring third parties?
Where did this CFO come from? Where is the cash flow coming from? How are you paying these experts?
Sure. Because if you've built a company to the point where you have lots of employees, where you've got real cash flow, where you can hire superfluous planners like a CFO... then you probably have a high opinion of your business acumen. After all, you created something from nothing.
What you're arguing for here is the existence of a professional managerial class to take over from entrepreneurs. Which... people have understood for 150 years.
Making money, you dunce. If you pay a third party for everything, you don't make money.
If creating a successful business is as simple as "hire some experts to think up a product, find you some customers, produce a good or service, and run the company" then why isn't it done already? After all, those experts your hiring can do this better than you - by your own admission, since you're relying on them for literally everything. SO why haven't they? Why is there an opportunity in the first place?
Everything you said in your post and in your replies makes sense to a degree, because the process is pretty simple if you look at it broady, but none of that is easy in practice. Like someone said in another comment, something being simple or complex is different from it being easy or hard. And anything can be described in simple terms if you think about it.
Those steps you described - saving money, creating the company and escalating it - are overall simple, but pretty hard to follow:
- Saving money. You either need to find a job that pays you really well or work for a very long time until you've saved enough;
- Creating the company. What kind of service will you provide? It's something you should previously know how to do, and you either need to do with really well to justify why people should pick you over the already existing players or something that no one around you does (nowadays, with the internet it's something that is becoming increasingly harder to do, since a lot can be done online; and finding a niche is something that only someone with experience is able to do);
- Escalating the company. Can mean a lot of stuff, but I'll stick to your examples. Let's say you've already stablished your company and want a consulting firm to help you: why would they spend their resources on your tiny business, with no growth history if they can to it with bigger companies, who are safer bets and sure to make them a lot of money?
About banks: as you said it yourself, you don't need to save a lot of money to start the business, so I'm assuming you're in the early stages, don't have much to offer other than a tiny amount of equity and potential. Don't expect them to loan millions or to offer mind-boggling advice that will make your business multiply by a factor of 10 in six months.
Yes, a lot can be externalized, but if you're starting it's not easy to convince people to do it for you, nor to build a customer base reliable enough to maintain a steady cash flow to pay them.
You also mentioned a CFO - why would you even need a CFO when you're starting a business? I'm not an entrepreneur, but have dabbed at doing that once with some friends. In my experience, if you're starting a business, you only need the absolute core people in your team. A CFO is not a core role for any company. You'll need one as much as you'll need an HR, legal department, or a marketing head. Once the company has grown enough and it's literally impossible for you to keep up with process overhead and provide the services to your clients, then you build those teams.
Step 1: Raise money
Step 2: Delay the hemmoraghing of cash that will inevitably follow
Step 3: Raise more money by developing unfeasible products/plans with buzzwords like "Blockchain", "AI", "Metaverse" or "Genomics" crammed into them.
Step 4: Wait for liquidity event.
This is dumb. What you've posted here is the "The Justification for Starting a New Business is Easy". Which is not the same thing.
You haven't touched on any of the thousand little things that go into a business. Who does your accounting? What kind of healthcare options do you offer to attract the best talent? How do you decide where to locate? Starting a new business is an insanely difficult and time consuming process. You don't understand the amount of pure shit that back offices at major companies take care of.
You're really good at explaining obvious things in way more words than are needed. Hey, perhaps that should be your business!
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Bill Gates is a fucking moron, bro. Don't you know that he should have hired everyone to do all the work for him and just lived large? I mean, seriously, what kind of dumbass entrepreneur even wants to do the work themselves? First thing you should do after college is pay someone to clean your apartment, and pay someone (preferably minimum wage) to come up with a billion dollar idea and then execute on it and hand you all the profits.
lol
"My Reasoning On Why Starting Businesses Is Easy" - An undergraduate student. Is it safe to assume you have never started a business from scratch? Have you even worked full time at an already established business?
As someone who has started their own company and actually developed a tangible product from scratch while working a FT job, I will tell you I am very glad I never dropped the FT job. No part of it is easy. Even if you have an extremely strong unique skill (e.g., SWE with full stack capabilities), marketing yourself and building a network of satisfied clientele that will vouch for you is still an uphill battle.
Good points
When does Part 2 come out - I’m so excited.
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